Last July, the Fed had about $800 billion in government Treasurys in its vaults. Now, it’s around $480 billion, and about half of that already spoken for. It looks as if the Fed is running low on liquidity to fight the fire raging on Wall Street.

Huh, “The Fed’s wiggle room is only about $250 billion of unencumbered Treasurys,” wrote Ray Stone, principal at Stone & McCarthy Research, in a recent note to clients. That $250 billion could go quickly: $85 billion to AIG, potentially $100 billion or more to help Lehman Bros. liquidate, and who knows who’s next.

“If any other country announced that its finance minister could print unlimited debt to do something similar, financial markets around the world would dump both the country’s debt and the country’s currency.”

“It may well be different because this is the United States of America.”

Sure, we’ve heard many time of people saying “It is different this time”. Back in 2000 everybody is saying that .com bubble will never burst because it is different. Look at where we at now?